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The Determinants of Capital Structure of the GCC Oil and Gas Companies

Author

Listed:
  • Ibrahim Elsiddig Ahmed

    (College of Business Administration, Ajman University, United Arab Emirates)

  • Ariba Sabah

    (College of Business Administration, Ajman University, United Arab Emirates)

Abstract

This study aims to investigate the determinants of capital structure (CS), how they differ among levels (upstream, midstream, and downstream), and to identify Which CS theory is more relevant to the oil and gas companies in the GCC. It uses secondary data of 22 listed oil and gas companies in the GCC over ten years (2010 and 2019). The study will add to the literature as there is few studies about CS in the petroleum industry and it is the only study about the GCC oil and gas sector. Using pooled ordinary least square (OLS) random effect model, the main findings of this study are; the CS has a positive significant relationship with the size and tangibility, negative with profitability, and insignificant with growth in sales, market to book value, and price to earnings ratio. the research concluded that the GCC oil companies are aligned with both trade-off theory and pecking order theory. The results show that only the determinants of downstream companies are significant, while middle stream and upstream have no significant impact on CS. One of the limitations is unavailability of data of some governmental oil companies and further research is needed to include non-financial determinants and investigate relationships between CS and the value of companies.

Suggested Citation

  • Ibrahim Elsiddig Ahmed & Ariba Sabah, 2021. "The Determinants of Capital Structure of the GCC Oil and Gas Companies," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 30-39.
    • Handle: RePEc:eco:journ2:2021-02-4
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    References listed on IDEAS

    as
    1. Cheema, Muhammad A. & Scrimgeour, Frank, 2019. "Oil prices and stock market anomalies," Energy Economics, Elsevier, vol. 83(C), pages 578-587.
    2. Joshua Abor & Nicholas Biekpe, 2005. "What Determines the Capital Structure of Listed Firms in Ghana?," The African Finance Journal, Africagrowth Institute, vol. 7(1), pages 37-48.
    3. Malcolm Baker & Jeffrey Wurgler, 2002. "Market Timing and Capital Structure," Journal of Finance, American Finance Association, vol. 57(1), pages 1-32, February.
    4. Franck Bancel & Usha R. Mittoo, 2011. "Financial flexibility and the impact of the global financial crisis," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 7(2), pages 179-216, April.
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    Cited by:

    1. Ireneusz Górowski & Bartosz Kurek & Marek Szarucki, 2022. "The Impact of a New Accounting Standard on Assets, Liabilities and Leverage of Companies: Evidence from Energy Industry," Energies, MDPI, vol. 15(4), pages 1-15, February.
    2. Hammoudeh, Shawkat & Tripathi, Nitya Nand & Raj, Asha Binu & Tiwari, Aviral Kumar, 2024. "Oil price volatility and changes in corporate debt: An empirical study in the Indian landscape," The North American Journal of Economics and Finance, Elsevier, vol. 73(C).
    3. Zhakupova Aizada & Arystanbayeva Saule & Issakhova Parida & Shakbutova Aliya & Alimshan Faizulayev, 2023. "Fueling Financial Sustainability in Emerging Markets: An Investigation of ESG Public Policy and Other Determinants in the Oil and Gas Industry through Effective Financial Planning," International Journal of Energy Economics and Policy, Econjournals, vol. 13(4), pages 365-374, July.
    4. Endri Endri & M. Iqbal Rasyid Supeni & Yanti Budiasih & Matdio Siahaan & A. Razak & Sudjono Sudjono, 2021. "Oil Price and Leverage for Mining Sector Companies in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 11(4), pages 24-30.
    5. Barbara Grabinska & Marcin Kedzior & Dorota Kedzior & Konrad Grabinski, 2021. "The Impact of Corporate Governance on the Capital Structure of Companies from the Energy Industry. The Case of Poland," Energies, MDPI, vol. 14(21), pages 1-25, November.

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    More about this item

    Keywords

    Capital Structure Determinants; GCC Oil and Gas CS; CS Theory; Debt Asset Ratio; Debt Equity Ratio.;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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